Unified Commerce and creating a frictionless buying experience through to del...
Business Connec Business Plan
1.
CEO
Ali
Larijani
COO
Rachel
Garrett
CFO
Wesley
Yoo
CMO
Rory
McCale
EVP
Malynda
Jenne
2. 1
Table of Contents
Executive Summary 3-5
I. COMPANY, CONCEPT AND PRODUCTS 6
a. The Company and Concept 6
b. Our Service 6
c. Service Differentiation 7
d. Market Entry & Sustainability 7
II. INDUSTRY ANALYSIS 8
a. Industry Segmentation, Size, & Growth 8
b. Industry Structure 8
c. Key Trends 8
d. Key Success Factors 9
e. Financial Ratios 9
III. MARKET RESEARCH AND ANALYSIS 10
a. Definition of Your Relevant Market and Customer Overview 10
b. Market Size and Market Segmentation 10
c. Market Share & Market Trends 11
d. Buyer Demographic and Buyer Behavior 11-12
e. Market Segmentation and Targeting 12-13
f. Competition and Competitive Advantage 13-14
g. Ongoing Market Evaluation 14-15
IV. ECONOMICS OF THE BUSINESS 16
a. Revenue Drivers and Profit Margins 16
b. Fixed and Variable Costs 16-17
c. Operating Leverage and Its Complications 17
d. Start Up Costs 17
e. Economic Model 18
f. Breakeven Chart and Calculation 19
V. MARKETING PLAN 19
a. Overall Marking Strategy 19
b. Pricing 19
c. The Selling Cycle 19-20
d. Sales Tactics 20-21
e. Advertising and Sales Promotion 21
f. Publicity 21-22
g. Customer Service 22
h. Guarantee Policies and Warranties 22
i. Distribution 22-23
VI. DESIGN AND DEVELOPMENT PLAN 24
a. Development Status and Tasks 24
b. Difficulties and Risks 24
c. Product Improvements and Features 24-25
d. Costs 25
e. Proprietary Issues 25
VII. OPERATION PLAN 26
a. Operation Model & Cycle 26-27
3. 2
b. Operations Strategy 27
c. Geographical Location 27-28
d. Facilities 28
e. Legal Issues Affecting Operations 28-29
VIII. MANAGEMENT TEAM 30
a. Organization 30
b. Key Management Personnel 30-31
c. Salaries and Competition 31
d. Board of Directors 31-32
IX. OVERALL SCHEDULE 33
X. CRITICAL RISKS, PROBLEMS, AND ASSUMPTIONS 34-35
XI. FINANCIAL PLAN 36
a. Highlights of the Financial Statements 36
b. Key Cost Controls 37
XII. OUR PROPOSED COMPANY OFFERING 38
XIII. APPENDIX
XIV. WORKS CITED
4. 3
Executive Summary
After speaking with over 20 different local businesses within the Syracuse area we found
out that with 30 minutes of the businesses time spent on BusinessConnect weekly, they
would save 10-12 hours of time on order purchasing per week. For example, a if a
restaurant plans to open in May and needs to order inventory and they want to get the
best possible price on each item. To do this the owner needs to research all the different
vendors that are in their area; this includes both national and local food vendors. Then,
once they have a list they need to contact each vendor about the product they want,
compare the different prices, negotiate prices on difference products, and finally make
final confirmation and await delivery. This needs to be done for each product with each
vendor. The total time this takes for an average business is 2 hours a day.
Similar to Amazon, BusinessConnect is a website where the small business can log on to
their account and use the search bar for a product, like napkins for example. Just one
click and the searcher will be presented with a myriad of products related to napkins from
many different vendors. A task that could take as long as five hours to complete, will be
reduced to a few seconds for the customer, thanks to BusinessConnect. BusinessConnect
allows customers to see the products quality as well as vendor reviews before making
their final decision. By providing greater transparency to the customer the suppliers will
be encouraged to offer as many quality products as possible. Quality and pricing
transparency are just two of the many benefits that BusinessConnect will offer to
customers.
BusinessConnect will also offer a group purchasing option for businesses to use to their
advantage. For the businesses that operate on tighter margins, they will be able to use this
option to avoid vendor’s order minimums this will also lower the customers per unit cost.
For example a café wants to purchase paper plates. Sysco has a minimum order amount
of $500, but the customer does not need $500 worth of inventory, $350 is exactly the
amount they wish to spend. Businesses wanting to make a purchase that would be below
the order minimum can be paired with another business in their local area that has a
similar need. By combining the two orders each business will be able to realize the
purchasing power of a group. In the example the two customers who used
BusinessConnect’s group purchasing feature lowered their per unit costs and were able to
do so in a time efficient manner. BusinessConnect’s goal is to provide its members with
convenient solutions to eliminate wastes from the ordering process.
BusinessConnect’s competitors include companies like Alibaba, Amazon, and eBay. As
well as vendors like Sysco and Maine’s Foods. BusinessConnect is taking a novel
approach to its entrance into the industry with the launch of its online marketplace.
BusinessConnect’s goal is to bring enough businesses to the website so that it breeds
vendor competition. For suppliers this will be an opportunity to grow its customer base
without the costs usually associated with growth.
BusinessConnect’s revenues will come from transaction fees that are placed on each
order. This amount is minimal compared to our competitors. Our company takes a .5%
transaction fee amount. In comparison Amazon takes almost 3% from their sellers. The
5. 4
fee of half a percent will reduce the suppliers profit margin by an immaterial amount
while at the same time bring them more business. The growth of their business at the
cost of .5%, per the dollar amount of the transaction, is low compared to the costs
associated with gaining new business.
The markets that BusinessConnect will initially target are in the northeast region of the
United States. The target customers will be businesses in the foodservice industry mainly
restaurants. With an emphasis on businesses starting up or those that are working on
lower profit margins. Through the companies’ primary research, we established that
within this industry, many businesses are struggling to break even.
In year 1 the geographical area that our website will serve includes Syracuse,
Binghamton, Utica, Albany, Rochester, and Buffalo. By year 2 we will be entering
Pennsylvania, followed by New Jersey in year 3, and then expansion into Connecticut in
year 4. After the 4th
year the management team will conduct a companywide analysis to
determine if further expansion is appropriate.
BusinessConnect’s customers will be the business owners, as well as employees
responsible for inventory and purchasing. These are the individuals who have to deal with
the day-to-day operations of their business. Initially to obtain a customer base the
company will use strategic partnerships with small business associations and connections
that have been made throughout the data gathering process to attract businesses.
BusinessConnect is offering to potential customers a website that costs the businesses no
money, and will accomplish in thirty minutes what now takes customers between 10 to
12 hours to complete
BusinessConnect is estimating that from 100% of our sales amount, 15% will be
dedicated towards shipping costs for the group-purchasing feature. Through market
research we have concluded that suppliers currently offer many of their customer’s free
shipping. Because of this BusinessConnect believes it too needs to offer the same benefits
to its customers. When a business has made a group purchase their order will be
processed and shipped back to them through common carriers BusinessConnect
contracted. Our company will contract with a common carrier that has prior experience
delivering to businesses. This carrier will pick up the supplies from the vendor’s
distribution center, and deliver the group order to each customer.
6. 5
BusinessConnect’s website will be produced through a third-party website development
company. This company is called Happy Fun Corp. The reason we chose to go with a
website development company is because they will have a group of talented employees
with a strong portfolio to back it up. Happy Fun Corp specializes in the development of
websites for startups as well.
At BusinessConnect, our senior level management team has both prior experiences in the
industry as well as prior business development. Our team consists of a CEO, COO, CFO,
CMO, and Executive VP. This team is a group of gifted individuals who have been
working together, and will be graduating from the Whitman School of Management at
Syracuse University. They have conducted intense research on both the e-commerce
industry and the foodservice industry. The group also has a strong knowledge of the
targeted geographical areas.
BusinessConnect has high fixed costs with low variable costs. BusinessConnect has a
contribution margin ratio of 84.88%. The company will break even in sales by November
(7 months in) of 2014 and see income of $5.4 million by year 5 of operations.
BusinessConnect will have a strong cash position by year 3, with about $3.1 million on
hand, and seeing that in year 5 we will be positioned at a little over $12 million dollars,
proves that our website will be a success with businesses within the Northeast.
Throughout the entirety of the first five years the company’s cash flows will never drop
below $100,000.
The management team is requesting $200,000 of venture capital. This is in addition to the
$100,000 of capital invested by the management team. This capital will go towards start
up costs and provide a cushion as the company finds it way through fiscal year one. Start
up costs consist of marketing and website development. By the end of year 3, April 2017,
BusinessConnect will offer their investors to receive an ROI of $400,000 as well as the
principle of the loan. This will also include 6% equity of the company in common
stock. In addition BusinessConnect will make a payment of $140,000 to cover income tax
liabilities from the gain of your investment. This is based off of a 35% tax rate on capital
gain. The company's firm value is $3,299,446.05 at a discount rate of ~49%. Since
BusinessConnect will be seeing a high growth in profits, the belief is that offering equity
will be beneficial.
7. 6
Section I: The Company, Concept, and Service
A. The Company and Concept
BusinessConnect will become a Limited Liability Company, giving the administrators the
option to choose to be taxed as a corporation or as a pass-through entity. This will also
give management and potential investors the opportunity to incorporate in the future if
they choose. An LLC will provide protection to investors whom initially invest capital for
our startup. The company will be formed in New York and commence operations within
a year and a half. We will be recruiting suppliers and customers leading up to the launch
date.
BusinessConnect’s concept can be similarly identified to the existing e-commerce
business, Alibaba. BusinessConnect is a website that will essentially give businesses (our
consumers) the opportunity to purchase all of it’s products needed for daily business
operations, from several different suppliers, on one internet marketplace. With the search
of a single product (e.g. napkins), the customer will be able to base their selection on the
price, quality, and distributor’s customer reviews. This will ease the pains owners are
currently faced with daily, such as making numerous lengthy phone calls to distributors,
finding and negotiating reasonable prices, and many other issues that have been identified
through primary research.
Mission Statement
At BusinessConnect we believe, “By helping one, we can help all”. By helping these
businesses, our initiative is to eventually stimulate local economic growth within
communities. By providing owners with a way to improve upon their business,
communities will become more business-friendly and consumers will be provided with
cheaper and better quality products and services.
B. Our Service
BusinessConnect is providing a service that allows consumers to browse/search an online
marketplace, which will be supplied by both local and global business product
distributors. If customers choose to make a single purchase they can experience the
benefit of pricing transparency without the hassle of having to call each supplier.
Connecting businesses in order to increase their purchasing power is a novel approach
that has never been done before. Through doing this, BusinessConnect is creating
opportunities for these companies to eliminate waste and cut costs.
BusinessConnect will not only offer price differentiation, but also provides customers
with a group purchasing option, which allows local businesses to combine similar
purchases in order to meet minimum order requirements that distributors set. This brings
convenience to the business owner, as they will not have to worry about holding off on
certain inventory until the following week. Through the use of common carriers,
BusinessConnect will organize and finance transportation for group purchasing
transactions, eliminating additional costs and hassle to the distributors.
8. 7
C. Service Differentiation
BusinessConnect differentiates itself by using a unique business concept to meet the
opportunity that lies in the growing e-commerce industry, while providing convenience to
its customers. Companies such as Amazon and Alibaba have high fixed-cost structures,
however, BusinessConnect believes once the sales break-even point has been met then
we will see an upsurge in operating profit.
By conducting primary research we have been able to gain insight into the issues that
these owners face which has led us to identify opportunities. As we continue to conduct
research in this field, we will eventually be able to examine how our service can be
tailored to suit all of the needs of the business and suppliers.
D. Market Entry & Sustainability
By using the Internet to conduct all business, our operations will have low overhead costs
creating a high operating leverage. Initially, we will have low variable costs; every dollar
of revenue will first help to pay down fixed costs. Anything earned past that will be
profit, which will go towards paying back our investors as well as expansion of our
company and product development.
Business Connect’s short run strategy is to start in the metropolitan areas of New York,
and eventually expand into new markets by the end of year two. The logistics of this
growth will be easier because of our Internet and business presence during that time.
Initially, we expect the growth to be slow for the first few months but eventually spark
since there is no cost to the businesses to use our site. By year four, we expect
exponential expansion after entering into Connecticut. BusinessConnect’s long run
strategic goal will be to service various businesses throughout the entire Unites States.
Staying competitive in this market will be difficult, due to the nature of the service and its
ability to be easily mimicked. Low prices and strong relationships with the distributors is
the only way BusinessConnect will be able to hedge against potential competitors. Our
sales representatives and management team have strategic plans to build relationships,
that include showing distributors how our service can help them increase sales and
become even more successful.
9. 8
Section II: Industry Analysis
A. Industry Segmentation, Size, & Growth
The NAICS code for the E-Commerce and Online Auctions Industry is 454111. Since the
beginning of 2010, the e-commerce industry has grown rapidly. Many consumers have
taken the alternative of using the Internet to purchase products, rather than shopping on
site. According to the IBISWorld Industry Report, the e-commerce industry is at $278.5
billion in revenue for this past year. The annual growth from 2009 to 2014 has been about
10.3%. Although the industry has grown a lot in the past, it is not in the maturity or
decline phase of the life cycle stage. E-commerce is currently in a rapidly growing phase
and is predicted to have an annual growth from 2014-2019 of an estimated 5.9%. The
earlier BusinessConnect gets into this business, the sooner we will be able to achieve a
strong industry position.
Another industry that we should pay close attention to is the Soft Drink, Baked Goods &
Other Grocery Wholesaling Industry (NAICS 42449). This industry has a decreasing
growth rate of 2.0%. Although BusinessConnect is primarily an e-commerce business,
the overall profits of its distributors and suppliers industry is important for generating
growth as well.
B. Industry Structure
BusinessConnect will be in a fragmented industry. With the exception of Sysco, Co.
many of our competitors each have a small market share, with many small firms in the
industry. The reason BusinessConnect will do well in this industry is due to the focus on
our customer service and geographic areas, which gives us a unique value proposition.
Our company will be introducing a tool that pairs convenience and opportunity with the
growing advances in technology.
We have classified our competitors into three different categories; suppliers/distributors,
wholesale retail stores, and online marketplace. Each of which has its own benefits to
consumers and are further discussed in Section III.
C. Key Trends
Within the e-commerce industry, some key trends include globalization of consumer
preferences, connectivity, and compliance. Consumer preferences have become a
complicated and emerging issue with the number of products out on the
market. Consumers can now order just about anything they need online. In this industry,
it is important to find the needs of the consumers and cater to their specific preferences.
Connectivity is a huge trend in the e-commerce industry. Connecting to the right vendors
and businesses in a timely manner while making it an easy flow of communication will
result in positive impacts on our consumers.
The global economy is growing and with that, rules and regulations are constantly
changing as well. Strict business practices make it more difficult for the industry to keep
up with the local knowledge of each area.
10. 9
D. Key Success Factors
Operational Efficiency
Efficiency is one of the main key success factors in the e-commerce industry. E-
commerce allows for people to connect with an easier flow for communication and
products. This increases customer satisfaction by providing customers/businesses with
the products they need on a timely basis and with an easier transaction to supply them
with their products all under one website.
Supply-Chain Efficiency
The distribution system is a key success factor in the industry because supply chain
management has become a large role in how businesses operate now. BusinessConnect
would be connecting businesses with the distributors they need, so BusinessConnect
would have to focus a large part on the supply chain aspect of what these businesses are
looking for and provide them with that service.
Website Maintenance
Website content planning will be a key success factor in not only the business, but also
this industry as a whole. Planning for the delivery of products, making relationships with
businesses, and providing the correct products on the website are all important aspects of
the website content planning. The products that are delivered and provided for businesses
to see on the website are key to making a successful company and providing customers
with satisfaction.
Internet Growth
The e-commerce industry appears to be growing at a rapid pace, as mentioned previously.
This is something that BusinessConnect plans to use to its advantage, as competitors such
as Sysco, Co. have no plans of expanding to the Internet in the near future. The V.P. of
Operations at Sysco, Bill Pawlewicz expressed in an interview that their senior
management is concerned with customers accessing the products they need via the
Internet instead of Sysco’s sales representatives, however there are no formalized plans to
move forward with this idea. (Primary Research, Appendix B)
E. Financial Ratios
Liquidity
To assess the liquidity of our company, we will be using an operating cash flow ratio.
This ratio will help us determine from our cash flow’s if we are able to meet our short-
term liabilities. This will also help the financial managers in planning for future projects
and assessment of the cash flow cycle.
Ø Operating Cash Flow Ratio: (Cash flow from operations / Current Liabilities)
ROI
Return on investments is important to protect the investment of the principal investors as
well as the valuation of the company. This ratio will also help differentiate ourselves, as
we will be aware of the status of our company in comparison to others. If
BusinessConnect’s ROI is doing better than it’s competitors within the industry, then we
will be seeing a higher company valuation.
11. 10
Section III. Market Research and Analysis
A. Definition of Your Relevant Market and Customer Overview
In the first year, BusinessConnect will target the cities of Syracuse, Rochester, Buffalo,
Albany, Binghamton, and Utica. The initial customer demographic includes businesses
within the foodservice industry such as diners, restaurants, delis, and cafes. The end user
will be the General Managers of these businesses, or the persons held responsible for
tracking inventory and calling in orders to suppliers and wholesalers. These
establishments should have multiple suppliers from which it orders the products it needs
for daily business operations. After the first two years of business, BusinessConnect plans
to continue to expand into other areas within the Northeast region of the United States.
B. Market Size and Market Segmentation
BusinessConnect’s total potential market is based on the total number of registered
businesses in the six cities listed above. Out of 50,179 total registered businesses, it is
estimated that one third of these would meet the segmented characteristics of our target
customer. This gives us approximately 16,726 potential customers. Projected customer
capture is estimated to be 7% of that number, giving us 1,170 customers in our first year.
During our third year of operating, we hope to start reaching out to several businesses in
the Northeast. After speaking with large distributors about their current customer base,
we have narrowed down our potential market to focus on cities these distributors serve
multiple times a week.
The most important customer demand is going to be based on the characteristics of
management type, profit margins, and inventory level. Businesses that are open to
innovation and increasing time and efficiency within its ordering process are going to be
more likely to adopting our service. Also, businesses that are working on smaller profit
margins, with less overall inventory, are going to be more attracted to group purchasing
and other membership benefits. Due to a stronger economy and higher consumer
confidence, our market segment is positively affected by increased foodservice sales,
which are expected to hit a record high in 2014. In addition, increasing technology trends
will have companies looking for ways to incorporate new technology into its daily
business operations.
12. 11
C. Market Share & Market Trends
The two industries that will affect BusinessConnect’s revenues are the E-Commerce and
Online Auctions Industry (NAICS 45411, IBIS), which has an annualized growth rate of
11.7%(IBIS), and the Soft Drink, Baked Goods & Other Grocery Wholesaling Industry
(NAICS 42449, IBIS), which has a decreasing annualized growth rate of 2.0%(IBIS). The
two industries together have an average annual revenue of $270.27 billion.
BusinessConnect’s potential market includes 16,726 customers. Through primary
research (Appendix B), it is estimated that these customers will be ordering $10,000
worth of products through our service per month. After factoring in the .5% transaction
revenue that BusinessConnect receives, potential revenue for the first year ends up being
$10,035,600. This gives BusinessConnect a potential market share of .00037%.
Currently Sysco Co. is the top leader in wholesale for the foodservice market. Sysco is
the process of buying its main competitor, U.S. Foods which will give them a 25%
market share. Many feel that this merge will lead the company to lend its focus toward
franchises and chains, leaving smaller businesses as a somewhat underserved market.
BusinessConnect’s service will cater to these businesses by getting them the products
they need efficiently and at a reasonable price.
D. Buyer Demographics and Buyer Behavior
The actual purchase decision-maker for our service includes the owners of these
businesses, with a strong influencer being the general operating manager, assuming the
two are different roles. The key stages to our customer buying process include the initial
awareness of our service. This is going to be an important part of our marketing strategy,
as we plan to personally reach our customers through door-to-door and different business
associations.
The owner/operator of Cosmos Pizza in Syracuse NY has indicated an interest in our
service, due to the stores difficulty in meeting order minimums as well as the option of
price differentiation. Potential customers who have expressed interest in our service are
Recess Coffee, Strong Hearts Cafe, Cosmos Pizza, and Cinderella’s restaurant. (Primary
Research, Appendix B)
Buyer Persona: Joe Miller
Joe has been General Manager for three years at a local cafe that offers a variety of
sandwiches and drinks. Each day he is responsible for tracking and stocking inventory for
daily business operations. This process seems tedious and time consuming, as it includes
calling multiple wholesalers and suppliers to compare prices before even finalizing an
order. About two to three times a week Joe goes to Sam’s Club or local grocery stores to
get perishable items or inventory he could not find at a reasonable price elsewhere. In
addition to this, Joe sometimes struggles to meet the minimum order of $500 that Sysco
requires. He expresses his frustration with the whole process of acquiring and ordering
products needed on a daily basis, and states that it takes his time and attention away from
customers and other business operations.
13. 12
Challenges
One of the biggest factors going into the purchasing decision is whether owners want to
share orders with competitors or potential competitors through group purchasing.
Another factor going into the purchasing decision includes management being
uninterested in adapting to new technology or operating routines. Thoroughly
demonstrating the values and benefits of our service through qualitative and quantitative
charts during our sales process will help to alleviate these buyer concerns.
E. Market Segmentation and Targeting
Our target market is businesses within the foodservice industry that do not include
franchises or chain restaurants. The primary focus will be on delis, cafes, family
restaurants, and diners. Although we do not have a distinct customer segment we will be
targeting, there are various characteristics we will use to prioritize and classify current
and potential customers.
The two main factors that will determine the purchasing decision include management
type and membership interest. We will use a four-quadrant diagram to categorize a
customer’s priority level. The left lever will represent the level of likeliness the customer
is to use the membership incentives, running from low to high. The right lever will
represent the management type based on the criteria listed below.
Management Type
-‐ Flexible
-‐ Innovative
-‐ Adaptive to change
-‐ Adaptive to new technology
-‐ Traditional
-‐ Habitual
-‐ Slow to adapt to change
-‐ Slow to innovate to new technology
While we look to target every single one of these businesses, we feel in order to
maximize profits we need to place a more primary focus on the businesses that are more
likely to use the membership incentives. The customers that are more interested in using
14. 13
the perks of our service will drive revenue and increase overall profit. The businesses that
are struggling to meet minimum order requirements each week are going to be more
attracted to our membership incentives (group purchasing, etc.).
It is assumed that the larger establishments (restaurants, diners, etc.) would have higher
profit margins, but this may not always be the case especially taking high traffic and
customer turnover into consideration. So we will use additional criteria to determine
which businesses are more likely to use our membership incentives.
High Membership Interest Low Membership Interest
-‐ Low inventory levels
-‐ Low storage space
-‐ Lower $$ total orders
-‐ Low profit margins
-‐ High inventory levels
-‐ Reasonable storage space
-‐ Higher $$ total order
-‐ High profit margins
A variety of other factors should also be considered during prospecting stage, such as the
number of distributors the customer is currently ordering from, and the business’s
location in relation to other customers and distribution centers (wholesalers, suppliers).
F. Competition and Competitive Edges
To determine who our competitors are, it is necessary to look at the process potential
customers are currently using to track and order inventory. Our competitors can be placed
in three different categories; suppliers/distributors, wholesale retail stores, and various
online marketplaces. Specific competitors within these categories are included, but not
limited to the table below.
Suppliers/Distributors Wholesale Retail Stores Online Marketplace
-‐ Sysco, Co.
-‐ Maine’s Paper &
Food Service, Inc.
-‐ Gianta’s Meat
Farms
-‐ BJ’s Wholesale
Club
-‐ Sam’s Club
-‐ Alibaba.com
-‐ Globalsources.com
-‐ Buyerzone.com
The fundamental values of our service that will provide economic benefits for our
customer includes cutting costs and saving time. The less time and attention managers
and owners have to put toward this process, allows them to focus on other areas of the
business.
Quality
The quality of service that we provide to customers is expected to be a competitive edge,
in comparison to the process potential customers are currently using. Due to the fact that
suppliers/distributors/wholesalers are already providing quality products to customers, we
will be doing the same as they are receiving the same exact products, just through a
different distribution flow. Our service will provide customers with more quality than it’s
15. 14
competitors because it will offer an even wider variety of products, in addition to member
reviews so that the customer can ensure the quality of what they are purchasing.
Price
The ability to compare prices on one website will allow our customers to get the same
products at the lowest possible prices, cutting costs, and creating value for their own
business. Already established online marketplaces require steep shipping costs, which our
customers will be able to avoid through becoming a member. Becoming a member and
user of BusinessConnect is completely free of cost for the business placing orders, saving
them time and money.
Performance
Currently, distributors and suppliers are slow in innovating the use of technology that
makes the process of tracking and ordering inventory faster and more convenient. The
V.P. of Operations at Sysco, Bill Pawlewicz, expressed that it will be a long time before
they move away from having sales representatives gather and enter invoices. Our service
will provide customers with an easy-to-navigate website that they have access to 24 hours
a day. (Primary Research, Appendix B)
Delivery & Order Accuracy
Wholesale retail stores can provide customers with the exact products they need, as soon
as they need them. This is something that our company must be aware of, as they will
always have that competitive edge over us. In order to competitively hedge against
distributors and suppliers, we will provide even more assurance of order accuracy and
timely delivery. After our system sends an order to a distributor we will require the
warehouse to send us an order invoice after it is picked and packed, and before it is
shipped. After interviewing local business owners, some have expressed frustration in
receiving late or inaccurate orders from companies like Sysco and Maine’s. (Primary
Research, Appendix B)
Service
The service customers receive from sales representatives seems unparalleled to any of its
secondary competitors, as they report on-site to build relationships. Business owners and
managers state that this makes the process easier when they are interested in ordering
new products, or if they have questions regarding packaging and quality. The customer
service wholesale retail stores provides ranges depending on location. We will provide
quality service through our website and customer relations.
G. Ongoing Market Evaluation
BusinessConnect will continue to evaluate our target markets by conducting surveys and
interviews to get a broad understanding of the direction the industry is going, and what
our current and potential customers value. Gaining contract agreements with both large
and small distributors and increasing the number and variety of products will be
important for future growth. Sysco, U.S. Foods, and Maine Foods are a few main
distributors that we will want to research in order to get a better look at the order process
that they are offering to potential customers. Most of our constructive feedback will come
16. 15
from potential customers, as we can better understand the opportunity and need our
service needs to meet. Any ideas for product-improvement programs and new-product
programs will come from the information we gather from local businesses.
17. 16
Section IV: Economics of the Business
A. Revenue Drivers and Profit Margins
Business Connect has a unique revenue driver. We expect our revenue stream to come
from transaction fees (placed on the supplier) using our website. We will be charging a
0.5% transaction rate. This revenue amount will be the amount our customer spends
multiplied by the .5% rate.
BusinessConnect’s variable cost would be the credit/debit processing fee, which would
be charged to collect the transactions fees, from the suppliers. This fee will be roughly
.12% based on all the major credit cards. Using this defined market, we estimate revenue
of $7.46 million and a profit of $5.37 million by year 5. Through our primary research we
estimate each business to be purchasing around $10,000 a month once we establish
ourselves within the market.
B. Fixed and Variable Costs
BusinessConnect’s variable costs would be a 0.12% credit and debit processing-fee of the
transaction fee amount. This would be an included cost with the transaction fee amount
of 0.5%. If a customer were to request group purchasing then we would also incur
shipping costs.
BusinessConnect will also incur variable costs for shipping through a common carrier,
which would be 15% of our sales revenue. This is an approximated amount we will incur
based off of our market research. The approximate cost of a common carrier picking up
one pallet from Sysco and delivering it to two separate locations is $150-$200. It would
be the same whether it is 20 or 100 miles away.
The graph that follows is the monthly fixed costs amount for the next year. These figures
are all results through primary research of the industry averages.
MONTHLY FIXED COSTS $ AMOUNT
OFFICE SPACE RENT $600
LEGAL FEES $1,250
PROGRAMMERS/WEBSITE MAINTENANCE $1,500
SALARIES $6,668
INSURANCE EXPENSE $300
ADVERTISING COSTS $20,000
18. 17
EXECUTIVE PAY $6,083
OFFICE EQUIPMENT RENTAL $2,100
TOTAL MONTHLY FIXED COSTS $38,501
Assumptions
*Salaries: $3,304 per employee, with two employees for the first year of operations.
* Rent: Used for holding meetings and appointments with potential customers.
(Craigslist)
*Office Equipment Rental: Office supplies (furniture, computers, phones, etc.) (Villa
Park Office Equipment)
*Website Maintenance: Server Maintenance, Software development
*Legal Fees: Attorney and Accounting Fees
*Advertising Costs: Marketing expense
C. Operating Leverage and Its Implications
BusinessConnect has a high operating leverage. We have high fixed costs with little
variable costs. This would mean that it will take us longer to breakeven and a riskier
venture. However, once we start obtaining our customer base, we will be able to achieve
substantial profit and we will not have many variable costs needed to increase our profit
margins.
D. Start Up Costs
Our Start Up Costs include research and development for the site, the incorporation fee
for a LLC in NY, and the trademark fee for our logo. These costs are a one-time cost that
we would pay that would not be included as part of fixed costs.
ONE TIME START UP COSTS $ AMOUNT
INCORPORATION FEE (LLC in NY) $200
TRADEMARK FEE $500
WEBSITE DEVELOPMENT COST $50,000
TOTAL ONE TIME START UP COSTS $50,700
19. 18
E.) Economic Model
Economic
Model
for
year
1
Start
of
2014
Number
of
potential
customers
(1st
year)
1,170
Supplier
Transaction
Fee
0.50%
Estimated
Consumer
Spending
Amount
[Approximate
=
1,170
customers
*
$120,000
amount
spent
a
year
(based
off
an
average
$10,000
being
spent
a
month)]
$140,400,000
Transaction
Fee
Revenue,
yearly
(1st
year)
$
702,000
Credit/Debit
Operating
Transaction
Fee
0.12%
Credit/Debit
Operating
Transaction
Amount
$
842.40
Start
Up
Cost
$
50,700
Year
1
Income
$
650,458
F) Breakeven Chart and Calculation
Due to the fact we are providing a service, we have two variable costs, but high fixed
costs. Our company will breakeven when our fixed expenses meet our revenue, less the
processing fees in sales. Our blended industry growth rate is at 9.7% for the following
year. We expect our revenues to surpass our expenses by November, 2014 (our 7th
month
into business). We expect to breakeven by the 2nd
Quarter of Year 2.
20. 19
Section V. Marketing Plan
*(All market research is in Appendix B)
A. Overall Marketing Strategy
The service BusinessConnect offers is unique to the foodservice industry. The marketing
philosophy is to provide businesses with a convenient and innovative process for tracking
and ordering inventory. Through using the website, businesses will cut costs and increase
overall revenue. Distributors using the website will also gain business from current and
potential customers. Fostering growth of subscribers, businesses in each city will help to
create new potential clients for BusinessConnect.
BusinessConnect’s marketing tactics will rely on personal selling. We will get in contact
with businesses over the phone, as well as follow-up sales meetings at the businesses.
This will be to introduce the product to the consumer and for them to be accustomed to
the interface. Even though it is very user friendly, BusinessConnect will also be directly
mailing businesses, but this will be done on a lower scale.
By being a very customer focused company, BusinessConnect will develop a positive
outlook for the company and service that is innovative and new. BusinessConnect
interviewed Laura Ryan, general manager at Strong Hearts Café, to find out what she
thought of the website and services BusinessConnect provides. Ms. Ryan explained how
the “price comparison aspect is great.” “It takes [Ms. Ryan] a lot of time to find the
cheapest product from the different vendors.” Ms. Ryan had been very enthusiastic about
an innovative way to make her purchases at Strong Hearts. She explained how “a lot of
people who work in restaurants, live and breathe their businesses, so they are constantly
looking for new things [for the business].” (Primary Research Report, Appendix B)
B. Pricing
The suppliers will be charged a 0.5% transaction fee for every order. This transaction fee
will act as the main stream of revenue, and a small expense for suppliers who in turn will
see a boost in sales volumes. Amazon’s transaction fee is 2.9% and Ebay charges 10% of
the total amount of sale and the maximum fee is $250. Comparing BusinessConnect’s
0.5% transaction fee to Amazon and Ebay, customers will be saving a significant amount
of money. This pricing strategy is more efficient compared to BusinessConnect’s
competitors.
BusinessConnect has lower overhead and lower variable costs compared to competitors,
and this allows the company to maintain profitability. The businesses that
BusinessConnect is targeting are in a niche market and this is a competitive advantage
that caters to our value proposition.
C. The Selling Cycle
BusinessConnect’s selling cycle will be an ongoing process and each step will involve
everyone in the company. A variety of marketing tools will be used to get the target
customer to become aware of how this service will add value to their company,
essentially creating loyal customers.
21. 20
D. Sales Tactics
The prospecting stage will include extensive research and searching for businesses that
will benefit from the use of the service. An administrative assistant will be responsible
for maintaining a database of both existing and potential customers, where each person in
the company has the ability to access and edit the status of customers. In the recruitment
process, the Chief Marketing Officer (CMO) will be looking for an administrative
assistant who has at least two years of experience, and will be paid on an annual
basis. The CMO will also be responsible for overseeing two sales groups.
Sales Force 1
This will consist of the founders of the company, and will work strategically to build
relationships with distributors and wholesalers. This group will only be necessary during
the first year of business, and will be responsible for gaining contracts ensuring that they
will sell their products on BusinessConnect’s web service. Persons in this group should
be trained to demonstrate how distributors could benefit and increase profits from using
BusinessConnect’s service. Once an agreement is worked out with distributors, it will be
easier to gain customers through word-of-mouth.
Sales Force 2
The CMO will be responsible for recruiting and training a group of two sales
representatives in the first year. These employees will act as sales representatives will be
involved in every step of the sales process and will be the main person in contact with
customers. In order to gain a maximum amount of customers in year one,
BusinessConnect will be recruiting highly skilled sales representatives. The candidates
must be driven, personable, confident, and assertive.
Training
Sales group two will undergo a four-day workshop of extensive sales training, before any
selling takes place. Through this, they will gain knowledge on every aspect of the
business. They will learn how to successfully approach customers and present the service,
showing features and benefits, and demonstrating how value can be added to their
Step
1:
Prospecting
Step
2:
Marketing/
PR
Step
3:
Approach/
Contact
Step
4:
Personal
Selling
Step
5:
Membership/
Transaction
Step
6:
Follow
up/
Incentivize
22. 21
business. They will be taught how to use the customer database and will be assigned sales
regions based on the city they are assigned to.
Compensation
Due to the fact that sales force one is being paid a base salary, these tasks are included in
their initial job criteria. Sales group two will be paid on a fixed and variable
compensation plan. The two sales representatives will be paid a fixed compensation plan
of $40,008 annually.
E. Advertising and Sales Promotion
The target market for BusinessConnect is different than most businesses.
BusinessConnect plans to advertise with a couple of approaches. In the beginning, the
company will work to build a rapport with businesses. Reaching out personally and
visiting the businesses to explain what the business does and how they can benefit will
increase the amount of exposure for BusinessConnect. However, since the company is
ideally targeting six cities in Upstate NY, it will help reach out to a broader potential
consumer base. The marketing budget will be roughly $20,000 for the first quarter,
$15,000 for the second quarter, $12,000 for the third quarter, and $10,000 for the fourth
quarter. When BusinessConnect expands to another state this marketing budget will be
the same. After the first year, the marketing budget in that state will stay at $10,000. To
reach these cities, BusinessConnect will need to use a couple different tactics.
BusinessConnect will begin by direct mailing to area businesses. This will introduce the
company as well as BusinessConnect's website. This will allow business owners to get
familiarized with the site and accustomed to its user-friendly interface. Next, the
marketing team will be emailing the different business managers inviting them to view
the website. The email will give them a guided introduction to what the website contains
and how to use it properly. Cold calling will be the strongest approach through contacting
food service businesses within the local area and introducing the new site. Since the
businesses have already received the direct mailers they should recognize the company
and the concept. Fourth, after initial contact is made, follow-ups will be conducted to
ensure satisfaction with the customers overall experience.
Another approach BusinessConnect plans to take is utilizing social media.
BusinessConnect plans to advertise through social media by making a fan page and using
advertisements with Google AdWords. With the popularity of social media in today's
world, a popular page and advertisement through these websites may be the best way to
target customers.
F. Publicity
Sponsoring a local community service project is one way BusinessConnect will be
exposing the business. For example, sponsoring food kitchens and food drives to help
those that are in need. This relates to BusinessConnect since we will be targeting diners,
restaurants, and cafes.
Developing an annual community award will create attention around the area and help
the company gain recognition. The community award will be given to the business that
23. 22
contributes the most food to the food drives that are connected with the local community
service project that is sponsored. BusinessConnect is helping to encourage new
businesses on opening up. Overall, this is helping to boost the economy within the cities
it is in. Many different organizations will recognize this as a major factor giving us free
publicity through news articles and reports.
G. Customer Service
Customer service is one of the most important factors for the success of the company. It
is very important for the company to develop a relationship with businesses. A small
office staff will be available to field customer queries and concerns. They will also set up
appointments for any business owners, and vendors, who want to come and speak with
any of the senior managers of the company. Customer service representatives will also
take suggestions and ideas to help improve the site.
Direct contact between BusinessConnect and the vendors will also be
crucial. BusinessConnect's sales representatives will have relationships with both the
vendors and the customers. Any problems that occur with vendors or customers, sales
representatives will be available to contact to fix the problem. The customer service will
be essential to keep both the vendors and customers satisfied.
H. Guarantee Policies and Warranties
Quick and accurate service is important to customers and in their purchasing
decisions. BusinessConnect guarantees quality and fast service, to provide customers
with the products they need. If problems occur within the service, BusinessConnect will
personally attempt to solve the problem with that customer. One example to satisfy a
disgruntled customer is by giving them a discount on products to make up for a mistake.
Any warranties that will be in place will be with the customer and the distributor. The
only warranty BusinessConnect will give is if there is a problem with the service,
resulting in customer discounts. Any service calls we encounter will be if a sales
representative needs to visit a customer due to a problem. The sales representative will
then try to amend the situation. This will be profitable to the company to ensure customer
satisfaction.
I. Distribution
Intangible
The majority of BusinessConnect's distribution channel includes employees and sales
representatives using the Internet, vehicles, and phones throughout the sales cycle.
Freight and delivery will be the responsibility of the distributor for a majority of
transactions. With group purchasing, BusinessConnect will be using a common carrier to
pick up the order and distribute this to the customers.
Tangible
Although distributors will be responsible for a majority of the distribution flow, they may
not agree to deliver to multiple locations for a group purchasing transaction. When
pickup and delivery is not confirmed by the distributor for these smaller orders,
BusinessConnect will pay to outsource this task to common carriers that handle small
24. 23
LTL (less than truckload), 1-5 pallet shipments. These transportation costs range, and are
based on freight class of the product, dimensions, and weight. BusinessConnect has
agreed to take on this initial cost because the customer's loyalty and membership will
become a long-term financial gain.
25. 24
Section VI. Design and Development Plan
A. Development Status and Tasks
BusinessConnect will be hiring the web development company Happy Fun Corp. After
hiring the company, BusinessConnect will be assigned a contractor/engineer that will be
responsible for the project and will be the main contact if any issues or concerns should
arise. By outsourcing this task, we are guaranteed a top quality, professionally designed
website in order to sustain an easy and convenient navigation for customers. Having an
ongoing contract with HappyFunCorp will be extremely beneficial, as it will ensure
information consistency, and as technology improves, changes will be able to be made.
This web development company was chosen due to its location, professionalism, and
experience with re-known corporations and successful start-ups. HappyFunCorp’s
location in Brooklyn, NY, will be helpful as they are a close and central location in
comparison to BusinessConnect’s growth strategy, and they operate in the same business
hours.
Once this process is complete, there will be a testing phase of one week, where local
small business owners will use the website run mock purchase transactions. This will
help find any bugs within the website/software, and will allow the operations team to
identify any potential bottlenecks or issues throughout the operations process.
B. Difficulties and Risks
There is considerable risk that lies in the development and design of the webpage and
software program, as the management team does not consist of anyone who has skilled
experience in web design. BusinessConnect decided to outsource this process in order to
mitigate this risk. It is still important that the management team seeks training and
guidance before and throughout the process so there is knowledgeable personnel for
operating and assisting customers.
Another challenge is that the business strategy may experience obstacles, within the
actual distribution and transportation of the products as they go from the wholesaler to
the customer’s hands. Deliveries of small amounts of freight to several different local
businesses will need to be financially justifiable to the suppliers. In order to foresee
solutions to these obstacles research into hiring common carriers has been conducted, and
BusinessConnect has agreed to incur the cost of group purchasing, or combined orders
that do not meet the minimum order requirements that distributors set.
C. Product Improvements and Features
With the assistance of the web development company, most of the tangible growth that
our service will experience lies in the features and navigation of the website. As the
company expands to new locations, the website will consist of regional tabs for
convenience. After growing financially and incurring more customers, the operations
team plans to make the website extremely personalized and customizable to its members.
There will be features that help business owners better track their inventory, allowing
them to view order history and recommended products will increase customer service and
ensure convenience and ease of use.
26. 25
To keep the business competitive, it is important to keep up to date on the needs and
wants of customers while expanding into new markets. Providing customers with all of
the resources and products they need and reaching as many distributors as possible will
help improve our service in the future. As BusinessConnect becomes more publicly
known and accepted, more distributors and suppliers will take interest in being a part of
the service, allowing us to offer customers a large variety of products and prices.
D. Costs
BusinessConnect’s management team will form a legal contract with HappyFunCorp, in
order to lock down on a fixed rate. During the first month of operating, $50,000 will be
used for the website/software development process. After the first month, $1,500 is
allotted for maintenance. It is important that BusinessConnect allows one month for the
engineers to build the software program and website from ground-up.
A large sum of money is being placed toward the software development process and
maintenance, due to the fact that the entire business solely relies on operating the website
and software program. BusinessConnect’s business strategy requires maximum time,
attention, and money be directed toward the research and development of this process.
E. Proprietary Issues
BusinessConnect will be using a trademark to protect its logo. This will be used to
identify and distinguish our name, protecting us from current or potential competitors. As
a company we are hoping to build brand recognition and eventually become innovators of
the industry. The costs of incurring a trademark are moderate and it will last for several
years.
27. 26
Section VII: Operations Plan
*(Mock Website, Appendix F)
A. Operations Model & Cycle
Front Stage Operations
The company’s front stage operations will consist of BusinessConnect’s website and the
group purchasing feature that is available to the customer. After the customer has placed
an order the subcontractor will be responsible for the distribution process. The exception
will be orders placed using the group purchasing feature. In group purchasing
transactions BusinessConnect will arrange transportation.
Backstage Operations
BusinessConnect’s primary focus will be on backstage operations. Once the customer has
made an order, the information regarding the order will go to both BusinessConnect’s
server as well as the vendors processing system. BusinessConnect’s servers will then
process the invoice. If it is a group purchase, the account manager will set up shipping of
the product from the distribution site. For group purchasing orders delivery of the product
will be carried out by BusinessConnect. The cost of a common carrier picking up one
pallet from Sysco and delivering it to two separate locations will range from $150-$200
regardless of distance. (Primary Research, Appendix B)
Subcontractor Accounts
BusinessConnect will have a specific employee responsible for each subcontractor
account during the first 6 months of operations. These employees will be responsible for
communicating with the subcontractors that have a contract with BusinessConnect. The
employee will establish an account, help manage the products recorded on the site, and
regulate the price per unit/price in bulk of the products, as well as any customer disputes
with that company. After the first 6 months, BusinessConnect’s membership base will
28. 27
become large enough for vendors to see the potential of increased revenue and less man-
hour pay. This will encourage them to have a designated individual to create/manage
their account.
Seasonality
BusinessConnect expects a slight increase in revenue during the fall/winter seasons.
Through research it was discovered that people tend to eat more food during the winter
seasons, inclining them to go out more, increasing foodservice sales. Due to this we
expect to see an increase in the number of products being ordered by customers. Since
our transaction fee is at a low percent, the seasonality will not have a dramatic impact on
our overall revenue.
B. Operations Strategy
BusinessConnect’s service will create value by offering its customers convenience by
having all their business supply needs one click away. The company’s operations strategy
is to bring innovation to the customer and subcontractors (distributors/suppliers) by
connecting them through a simple and cost effective purchasing platform.
BusinessConnect’s supplier partners are established world-class foodservice companies.
BusinessConnect will use this to its advantage by having these companies continue to
carry out the tasks they do well on a daily basis. The subcontractors will be responsible
for picking, packing, and shipping every order a customer places.
Bottlenecks are anticipated to occur from the time the order is sent to the distributor to
the time the warehouse picks and packs the shipment. Communication with
subcontractors is going to be key during this process to ensure that customers receive the
best service. In order to minimize bottlenecks, BusinessConnect will use a “marshall”
system, which is used often in warehousing to ensure the accuracy of orders. This system
will require warehouses to electronically send the invoice of picked and packed orders to
BusinessConnect’s operations department, before it is shipped. Once the appropriate
personnel approves the invoice, the warehouse is then informed that the order is ready to
be shipped.
At BusinessConnect, we believe that quality control for our customers is a major concern
and will be managed by the use of this process. Through primary research the
President/Owner of The Mission Restaurant, Steve Morrison, had brought up a major
issue with one of their former distributors, Goya Foods. “Goya is the most difficult
[distributor] to deal with, with silly restrictions like 10 case minimums. This is ironic that
because they short-shipped 5 cases when they are out of stock for the other 5.” By
implementing the “marshall” system, BusinessConnect will have the opportunity to make
sure every order is accurate to the last detail. (Primary Research, Appendix B)
C. Geographic Location
BusinessConnect’s offices will be located in East Syracuse, NY. Business will be done in
the following targeted upstate New York cities; Utica, Syracuse, Buffalo, Albany,
Rochester, and Binghamton. Because all of the stakeholders currently reside in and
around Syracuse, it will be the easiest and most efficient location for the headquarters. It
29. 28
is also in a central location to the six-targeted cities with a span of 150 miles max,
making traveling for sales representatives easier, so that it is possible to develop
relationships with the customer base. Also, keeping business in New York alone will
allow for BusinessConnect to fall under one sales tax rate, until market expansion
D. Facilities
An office space will be the only facility needed for operations. The entire office will
consist of a large room with a cluster of five cubicles, a small room for the sales
representatives to share, and a small conference/meeting room. The room of cubicles will
be used for the stakeholders of the company, allowing for each person to have their own
workspace, but still be able to work collaboratively with each other. The office space will
be a leased facility in an industrial area, and will be needed as soon as possible to start
conducting research and development. The space will eventually have to expand to a
bigger facility as sales grow because more sales representatives will be hired.
Budget
The budget for office expense is $24,000 for the first six months, allotting $4,000 a
month for leasing space. There is a $2,400 budget for office utilities in the first six
months of operating. Utility providers will be National Grid and Verizon Wireless.
Verizon will be the best option, as we will be able to use their small business package,
which allows for unlimited local calls and high-speed internet service with 99.9%
network reliability. A Landline will not be necessary, however there will be a designated
mobile phone located at the office for customer service calls. Each employee, including
sales representative will be provided with a mobile phone.
Design
The sales representative’s office should range is size from 17’4” x13’4” to 19’4” x13’4”.
This will be appropriate space for two small desks, and a small table with chairs. The
cluster of cubicle workstations should be 47” high and 5’x5’ in size. This will be
sufficient because it will offer privacy for each of the employees, but still allow for work
in the same room. The size of the conference room will be larger than the sales
representative’s room and should range in size from 23’4” x14’2” to 25’4” x14’2”. This
will be large enough for a 180” L x 58” W sized conference table, which will allow for
meetings with as many as 12-14 people. This will allow for the company stakeholders
and sales representatives to meet, and will also be the space used for employee training.
E. Legal Issues Affecting Operations
Contractual issues will be the area where BusinessConnect will face the greatest liability.
For legal purposes we will have to have agreement terms for each member so that they
feel secure about paying their yearly dues. We will also have to enter into contracts with
freight vendors to ensure that member’s orders are delivered in a timely manner and
obligations are met.
A company code of conduct will be created that will act as governance for employees.
We will offer at will employment meaning at any time the company or the employee can
end a working relationship. Based on the code of conduct we can make sure that all
30. 29
employees are aware of the policies of the company. Having a strict set of guidelines that
employees are made aware of should help to reduce workplace misconduct. These
guidelines will ensure that the employees and the management have an understanding of
the behavior expected. If behavioral expectations are not met then the consequences will
also be communicated via an employee handbook that will be distributed with the code of
conduct.
The company will also face tax liabilities within the state of New York as well as federal
taxation. Being compliant of both state and federal tax laws will ensure that legal issues
will not arise.
31. 30
Section VIII: Management Team
A. Organization
B. Key Management Personnel
Ali Larijani, Chief Executive Officer - Ali’s role will be to shape the development and
strategy of the company in conjunction with the rest of the management teams inputs
based upon their area of expertise. Ali started a company called C4 Scooters, which
generated revenue of around $90,000 a year. He is also a dual B.S. major at Syracuse
University for Finance as well as Entrepreneurship & Emerging Enterprise.
Wesley Yoo, Chief Financial Officer - Wesley’s role is to manage all the financial
activities for the firm. Wesley has interned at two prominent accounting firms in the past
and has experience dealing with many small businesses. He has worked with managing
these small businesses’ finances by separating AR/AP, revenues, expenses, and
reconciling cash. He is an accounting major at Syracuse University.
Rory McCale, Chief Marketing Officer - Rory’s role will be to manage the marketing
strategy and approach at BusinessConnect. Rory established the ideal pricing method,
market research, and will be developing the companies prime customer service. Rory
enters with strong customer service experience from positions held with both
Aquamaestro and BNY Mellon. At both companies, Rory dealt with customers directly
on a day to day basis representing the reputations of both firms by ensuring that each
customer’s experience was positive.
Rachel Garrett, Chief Operations Officer - Rachel’s role will be to establish and maintain
relationships with suppliers and retailers so that the business maintains continuity. She
will be responsible for overseeing the flow of operations from when a customer makes a
transaction to when the customer receives their order. She is a member of the Franklin
Supply Chain Club and Syracuse Enactus at Syracuse University. She has interned as an
32. 31
Assistant Buyer at Ross Stores, which included building relationships with vendors,
negotiating prices, and tracking shipping of purchase orders.
Malynda Jenne, Executive Vice President - Malynda will be a part of the rollout of new
processes, development, and streamlining of operations. She has previously worked at
Enchanted Forest Water Safari in a supervisor/management position. Managing
approximately forty people, she has experience in working across multiple departments.
Malynda is a retail management major where she has experience in not only selling
products but bringing in clientele.
C. Salaries and Compensation
The compensation for each of our members will be modest in the beginning with each of
the management team owning 20% of the company after year two. Because of the nature
of our business, a cost based model will require us to each receive about $16,000 a year
with raises being contingent upon growth of the business. After year two when all the
partners are vested, the management team will share profits equally and have equal
ownership of twenty percent.
Currently stock placement is spread up equally between each member of our business.
That is 20% each member. Each member, excluding the CEO, will be on a 2-year plan.
At the end of the first year they will receive 50% of their stock, then at the end of year 2
they will receive 100% of their stock amount. So, at the beginning of the year, the CEO
will have 100 shares (100%). After year 1 the CEO will have 50 shares (50%), while the
other members will have 10 shares each (10%). After year 2 the CEO will have 20 shares
(20%) and the other members will have 20 shares (20%) as well.
E. Board of Directors
(Board of Directors, Appendix D)
Matthew Turcotte is the CEO of both North Shore Solutions and Grindstone
Holdings. With his experience in web design, web hosting, and marketing, Matthew has
expert experience within this field. He has also written his book From Main Street to
Mainstream: The Essential Steps to Launching Your Small Town Business Online, which
refers to how his experience of starting his own web development company online
became a success.
Gerard Briscoe is currently the IBO/Agency President of Mode Transportation, a subsidy
of Hub Group, located in Brewster, NY. He has extensive experience in the supply chain
and transportation industry and will be able to provide us with knowledge regarding
contracts with common carriers and freight terms for our group purchasing strategy.
Gerard also has several networking opportunities and will help us get in contact with the
large distributors and suppliers that are essential for our business.
Michael Hara is the Vice President of Investor Relations and Corporate Development at
Cortina Systems, a leading supplier of high-speed network communications
semiconductors. He is a 33-year veteran of the personal computer, computer graphics
and semiconductor industries, and was previously VP of Investor Relations and
Communications at NVIDIA. At NVIDIA, Michael served as senior vice president of
33. 32
Investor Relations from 2000 to 2011 and helped grow NVIDIA from a private startup to
a multi-billion dollar public company. He joined the company in 1994 as their first
director of marketing where he was prominent in creating their corporate identity and
product line branding. Prior to NVIDIA, Michael worked at S3, Wyse Technology,
Radius, Verticom Graphics, Vermont Microsystems and GE Healthcare in various sales,
product line development, and corporate and strategic marketing roles. Given his
involvement in developing computer graphics subsystems starting with the IBM PC in
1984, Michael is considered an industry expert on the PC graphics industry. He is a
graduate of DeVry University and has a Bachelor of Science degree in Electrical
Engineering.
Brendan Farnach is the president of All-Seasonings and handles many of the day to day
functions of Cinderella's restaurant located in Sylvan Beach, NY. Brendan's family has
been an integral part of the Sylvan Beach community for several years owning and
operating multiple businesses. All Seasonings has grown from a few thousand in revenue
per year to a multi-million dollar revenue firm in just over ten years. Brendan has been
able to juggle his duties with All Seasonings allowing the company to grow while
continuing to have a role with Cinderella's. Besides being president of All Seasonings,
Brendan also places all inventory orders for both businesses.
Bill Pawlewicz is the Vice President of Operations at Sysco, Co in Syracuse, NY. Bill
will be an asset to our company due to his support and presence in the food and beverage
wholesaling industry. He has worked in the industry for over twenty years and has the
knowledge and experience that will be important to our company. Bill is enthusiastic
about the business concept and is interested in investing his time in making it become a
success. This member of our board of directors will help us build relationships with
subcontractors, which is key to our operations strategy.
34. 33
Section IX: Overall Schedule
(See Appendix E for Schedule of Operations)
BusinessConnect like any other company has many risks associated with its operations.
There are a number of variables that could prove disastrous if they are not managed
properly. BusinessConnect needs to move quickly which means that even before
financing has been obtained the management group will begin evaluating office locations
and the paperwork will be filed to create an LLC. Once financing is obtained construction
of the website can begin. The time period from when the LLC is formed to the proposed
launch date of the website which is May 12, 2014 are critical. All of these activities have
been planned so that the launch of the website will not be delayed. The sole focus of the
management team is to do whatever is necessary to make sure the website is fully
functional by May 12th
.
Before the launch of the site, key personnel will be hired over a 20-day period with the
staff being finalized by 05/20/2014. The only variable that can present a challenge is the
delivery of member’s orders via freight services. Transportation costs are something that
will be closely managed as part of the monthly expense review. Along with a review of
the costs incurred from transportation customers will be ask to rate their BusinessConnect
experience. Members will be asked about their delivery experience in addition to the
online experience. Customer reviews will also be reviewed monthly to ensure the
business is running smoothly.
35. 34
Section X: Critical Risks, Problems, and Assumptions
Based upon the pro-forma financial statements drafted by the management team,
BusinessConnect has the opportunity to be profitable in just over a year. The company’s
startup costs are at a minimal $50,700. The overhead and monthly expenses translate into
the company realizing a high degree of operating leverage. BusinessConnect’s managers
predict having cash flows that never fall below $100,000. The company expects to obtain
1,170 customers in the first year based on research conducted on the local geographical
areas, and the need based services offered. These customers are expected to spend
$10,000 a month on average per customer. From interviews with business owners the
company expects the group purchasing feature to be used sparingly until the business
becomes more established. Sales are projected to grow at a rate that is higher than the
blended industry average which is 9.7%. In year five, revenues are predicted to exceed
five million dollars as the company continues to expand outside of New York and into
other territories. This expansion will present tax liabilities for the owners and investors,
but the management is aware of these liabilities and has a plan in place to take care of the
investors year to year tax liabilities.
A startup company faces many risks and investors need to be aware of these risks before
they invest capital. The rate of growth in sales will depend on how quickly
BusinessConnect expands. Growth will depend on how fast the brand reputation grows
and the number of customers that use the site along with the frequency at which they
make purchases. This will be important to monitor in the first year of business. Producing
sales is a cost intensive process for a startup and BusinessConnect will face many of the
same challenges as other startups. To navigate through this difficult process,
BusinessConnect will put its focus on attracting a loyal customer base.
Because the business model is untested, BusinessConnect faces a high degree of risk that
is immeasurable due to the fact that a comparable company does not exist. One of the
main aspects to look at is the market research and primary research that BusinessConnect
has completed. This will provide investors and stakeholders with the assumptions listed
in the financial statements.
In order to mitigate risks within the operations strategy, BusinessConnect is renting all of
its property and equipment, and little capital will be invested in tangible assets. There is
technological risk that lies in the actual use of the website and software program. It is
important that the website is easy and efficient for customers to navigate, and that
transactions run smoothly through the distribution channel. To ensure a minimal amount
of technological risk, extensive research was done in searching for a preferred web
development company. The third party that will be used is HappyFunCorp (web
development company), which has strong reputation and professional engineers with
fifteen years of experience. They also have a successful history of working with startups
and building software programs from the ground up. HappyFunCorp is based out of
Brooklyn, NY and BusinessConnect has made sure that there will be a project manager
and engineer available to communicate with when needed. This is extremely important in
36. 35
case there are any unforeseen technological obstacles that arise early in the life of the
firm.
The threat of competitors mimicking the website is also a major risk. Sysco, Co. is one of
BusinessConnect’s major competitors and with the amount of supplies and vendor
relationships that Sysco has already developed could affect BusinessConnect.
Fortunately, BusinessConnect has chosen to focus on certain areas of the industry that
Sysco has chosen not to allocate its vast resources towards. For example,
BusinessConnect offers several advantages to customers that Sysco, Co. does not
currently provide. In order to avoid competitive risks, BusinessConnect will constantly be
aware of subcontractor’s business strategies and what they are doing to move forward.
BusinessConnect is focused on building partnerships with these distributors as a way of
avoiding competition.
Having the expertise of CEO, Ali Larijani, will also be key in mitigating business risk.
Ali is an Entrepreneurship and Emerging Enterprises major, and co-founder of C4
Scooters, an e-commerce retail business. In relation to BusinessConnect, Ali has
experience in managing a company’s reputation and developing key relationships with
suppliers.
37. 36
Section XI: Financial Plan
*(See Appendix A for Financial Plan)
A. Highlights of the Financial Statements
BusinessConnect should be seeing a loss in revenue of $100,380 after year 1. This is due
to our fixed cost business structure. BusinessConnect’s market potential will be
increasing based on an estimated size. We believe that we will obtain all our market
potential for New York by August of 2015 (Y1). BusinessConnect had estimated average
sales to be separated by quarter. In the first year in New York, the average spending per
business will be $2,000, quarter 2 will be $6,500, quarter 3 will be $8,500, and then
finally quarter 4 sales at $10,000.
Years State Customer Market Potential
2015 (Yr 1) New York 1,170
2016 (Yr 2) Pennsylvania 3,148
2017 (Yr 3) New Jersey 1,969
2018 (Yr 4) Connecticut 6,152
2019 (Yr 5) No expansion
In the graph below we show how we spread out the customer’s estimated spending
amount, and the increase, until it reaches the customer’s average amount, which was
obtained from the primary research. Below average spending, we explain our market
potential growth rate for year 1. Year 2-5’s growth rate is at a slower growth rate because
our company will be headquartered in Syracuse, NY estimating for distance.
Month Jan Feb March April May June July Aug Sept Oct Nov Dec
Average
Spending
_ $2,000 $2,000 $6,500 $6,500 $6,500 $8,500 $8,500 $8,500 $10,000 $10,0
00
$10,000
Market
Capture
% (Yr 1)
10% 20% 40% 80% 90% 95% 100% 100% 100% 100% 100%
Market
Capture
% (Yr 2-5)
20% 50% 90% 100%
BusinessConnect will be assuming a variable expense of 15% of revenue for group
purchasing shipping. This has been assumed through BusinessConnect’s primary research
information. (Primary Research, Appendix B)
The company expects to start seeing a positive operating income by November of 2014.
By year 3, we believe that BusinessConnect’s operating income will be $1,864,419. Since
the company will be renting most of its things, and being based online, we will have very
little assets. BusinessConnect will be seeing $2,970,797 cash on hand in end of the year
3. This cash on hand will be one of the major benefits of BusinessConnect’s expansion as
well as product R&D.
38. 37
C. Key Cost Controls
BusinessConnect will have a policy of intense oversight in order to eliminate overhead
expenses, with monthly reviews, in the first twelve months by the CEO and CFO will
reduce waste. Starting in year two, this will be relaxed to a quarterly review, but the
CEO and the CFO will continue to conduct monthly expense reviews. Annually, the
entire executive team will conduct expense reviews. This will give all of management
the opportunity to voice concerns and share any ideas regarding the firm’s spending
policy. This policy will insure that the company has effective internal controls over
operations spending, and everyone on the management team is on the same page.
39. 38
Section XII: Our Proposed Company Offering
The management team is requesting $200,000 of venture capital. This is in addition to the
$100,000 of capital invested by the management team. This capital will go toward start
up costs and provide a cushion as the company finds it way through fiscal year one. Start
up costs consist of marketing and website development. By the end of year 3, April 2017,
BusinessConnect will offer their investors to receive an ROI of $400,000 as well as the
principle of the loan. In year 3 they investors will be given 6% equity of the company in
common stock. In addition BusinessConnect will make a payment of $140,000 to cover
income tax liabilities from the gain of your investment. This is based off of a 35% tax
rate on capital gain. The company's firm value is $3,299,446.05 at a discount rate of
~49%. Since BusinessConnect will be seeing a high growth in profits, the belief is that
offering equity will be beneficial.
47. Appendix
A
Financial
Ratios:
Contribution
Margin
Break
Even
Point
48. Appendix
B
Primary Research Report Form
Interview Details
Student’s Name Ali Darzi Larijani Section 003
Expert’s Name: Thomas Diccone Date: 3/26 Time: 2:06 PM
Expert’s Title: Manager
Expert’s
Employer Freedom of Espresso Expert’s Phone Number: (315) 415-1730 [Cell]
Expert’s E-mail: Tdiccone2@gmail.com
Interview Questions
Question: How do you purchase your supplies for your business?
Notes: “Via telephone” “Some of them already have past purchases with us” He explained that he calls the vendor
and depending on the size of the company they will either have an account of him or he will explain what he needs.
Question: If there were a site to facilitate the purchases of supplies would you utilize it? Why/Why not?
Notes:
“It would be possible for me to be interested.” “It would make a more organized way of ordering than the
system in place now.” A reason he said why he might not use it is because most businesses and himself
Already have a set up and successful method to make their purchases. So some people might think that there’s no
reason to deviate from that.
Question:
What do you recommend we should do to help make this site more catered to business such as
yourself?
Notes:
“For me and other businesses, an incentive would be the best because we already have an established
method of purchasing”
Additional Notes
Q Who are your vendors? Coca-cola, Onadaga beverage (local), Housted Dairy(local), Central Restaurant Supply
(local)
Q How is your relation with your vendor representative? “It’s really good, actually” A lot of them stop to get coffee
so they are not just someone I call once a week, but also fans of the business”
Q If we provided a browsing section, to help people who want to spruce up their business and purchase new
things, do you think that would be useful?
“I think that’s a good idea” “Things that come up on search engines can be very misleading though compared to what
you are looking for.” “Make sure things are clear for the consumer” Make the browsing section keyed towards the
consumers business.
Q Some of the major features we offer are group purchasing, subsidized shipping, vendor reviews, as well as
other features to be released. These features would be based off of a membership service which you would
purchase. Would you purchase this service?
49. Appendix
B
“To be honest probably not, I only say that because a majority of my shipping needs when purchasing products is
already under free shipping.” “I work for 4 locations so we don’t usually have any extra cost so we wouldn’t have a
reason to use that.” So based on the business and its size some people won’t find interest in this extra expense.
Q If yes, then how much would you be willing to spend? (Ex: $500, $1,000, $2,000, $3,000)
---------
Q What are some current problems you are having with your vendor, if any?
“One of our vendors that we just discontinued using, because they had inconsistent products. It was a bakery and I
would order as need basis and sometimes the product I ordered compared to what came would be completely
different.”
Q How do you believe we should contact individuals such as yourself to introduce our product?
“ For me at least calling over the phone works. But for most businesses I’d recommend to set up interviews in person
by calling first” This has varied between many different people. Some businesses believe calling is bad while others
see it as a much easier approach.
Q How do you pay for your vendor costs and how long do you spend on average with the vendors contacting
them?
“We pay by check on most part, if we have the cash on hand that usually works too.” “Using a credit/debit I am not
sure if we can order because I don’t have a company card, the owners do. But, for them I don’t see it as being difficult
in any way.”
“I’ve spent around 10-12 hours contacting the different vendors that distribute to us a week, for many different
reasons”
They spend less than 10,000 a month on one store. They have 4 locations.
Primary Research Report Form
Interview Details
Student’s Name Ali Darzi Larijani Section 003
Expert’s Name: Steve Morrison Date: 3 / 26 Time: 2:02
Expert’s Title: President
Expert’s Employer
Self-Employed (The Mission
Restaurant) Expert’s Phone Number: ( 315 ) 475 - 7344
Expert’s E-mail: stevemo@gwcny.rr.com
Interview Questions
Question: How do you purchase your supplies for your business?
Notes:
“Go through the brokers” Does his own inventory. “Sysco will contact me weekly to see what’s going on
and if I need a re-order on something that I don’t usually need”
50. Appendix
B
Question: If there were a site to facilitate the purchases of supplies would you utilize it? Why/Why not?
Notes:
“Sounds convenient, I would definitely check it out and see what the site’s about.” He constantly want’s
to lower his costs so if he could do that online with out having to contact the vendors that would be
perfect.
Question:
What do you recommend we should do to help make this site more catered to business such
as yourself?
Notes:
“ Make it suited towards best price” “Availability is also a major issue with vendors. I place an order [with
the vendor] but when it goes through they notify me that it is unavailable or they bring me less of the
amount I ordered and refund me. So someway to know in advance if the items are out of stock.”
Additional Notes
Q Who are your vendors? Sysco, Maines, Andy’s Produce, Goya, Regional Access are our main one’s
Q How is your relation with your vendor representative? Each of my representatives are pretty good. Sysco I meet
with once a week, Goya phone order every couple of weeks, Andy just leave a message and they get back to me with
conformation. Maine’s is on a need basis so I just go to the store when we need it..
Q If we provided a browsing section, to help people who want to spruce up their business and purchase new
things, do you think that would be useful? Yes I would be interested …. (He didn’t really elaborate on this)
Q Some of the major features we offer are group purchasing, subsidized shipping, vendor reviews, as well as
other features to be released. These features would be based off of a membership service which you would
purchase. Would you purchase this service?
Not so sure about
Q If no, then why would you not purchase this?
“It’s another expense… what am I getting for my money… Will I be getting a better deal” So basically we would need to
elaborate on this idea when marketing to businesses to purchase it. He also said that if we were to make a guarantee of
cheaper costs through things like group purchasing and shipping then he would be more inclined.
Q If yes, then how much would you be willing to spend? (Ex: $500, $1,000, $2,000, $3,000)
“Similar to Sam’s club, so a yearly membership.” Sam’s club membership is $100 a year. This would be a low amount of
revenue, but we would bring in customers to be more loyal. We would also get more businesses to sign up at that price.
Q What are some current problems you are having with your vendor, if any?
“ Goya is the most difficult one to deal with, with silly restrictions like 10 case minimums. Then it’s ironic that they will
ship me 5 cases because they are out of stock for the other 5. Also don’t have their own drivers they hire other people
and those guys just drop off the product at the door they won’t take it to where you want them to similar to Sysco and
51. Appendix
B
other vendors. But, they have a great line of products”
- So if we were to somehow fix the availability problem it would fix a major issue with businesses not getting enough of
what they need.
Q How do you believe we should contact individuals such as yourself to introduce our product?
“ Start with a phone conversation because I have a very busy day. Then follow up with a sales drop in”
Q How do you pay for your vendor costs? On average how much time do you spend speaking with these
vendors a week?
“ I spend about $5,000 a week on most of my supplies, this is not including beer and wine.” About $20,000 average
every month. Our estimates are only for $10,000
“When I was first starting I spent almost 20 hours a week just to find all the right prices and the right vendors I want to go
with, but now its around 5-10 depending on what I need to do or if they are contacting me on something.”
Primary Research Report Form
Interview Details
Student’s Name Ali Darzi Larijani Section 003
Expert’s Name: Laura Ryan Date: 2 / 24 / 13 Time: 2:00 pm
Expert’s Title: General Manager
Expert’s
Employer
Strong Hearts Café (Marshall Square
Mall) Expert’s Phone Number: (315) 478-0000
Expert’s E-mail: laura@strongheartscafe.com
Interview Questions
Question: How do you purchase your supplies for your business?
Notes:
“We are a Vegan only restaurant, so we have to go through natural and organic distributors.” “Most of the
bulk food from them” “Most basic supplies from Sysco, or owner goes to Mains a supply store for
restaurants that is cheaper than Sysco”
Question: If there were a site to facilitate the purchases of supplies would you utilize it? Why/Why not?
Notes:
“Price comparison aspect is good” “Takes a lot of time to find the cheapest product” “negative
connotation towards Sysco, since everything is frozen and not as fresh” “Brought us to warehouse and
made us a meal and gave a tour of the warehouse”
“Our rep at Sysco is helping us bring in new supplies to Strong Hearts, things that our organic and vegan.
Question:
What do you recommend we should do to help make this site more catered to the small
business, such as yourself?
Notes:
“Main benefit would be the price comparison, make sure that part is very clear.” Make a way to price the
products per unit, how big the cases are, and the overall price. “I have to check all the prices by unit
myself”
52. Appendix
B
Q
How
is
your
relation
with
the
Sysco
rep?
:
“I
email
him
our
order”
“When
theirs
problem
with
supplies,
we
need
to
contact
him
to
switch
it
out
or
exchange
things”
Sysco
rep
can
be
easily
replaced
for
putting
in
orders
but
when
theirs
a
dispute
they
would
need
to
contact
him
in
case
an
order
is
messed
up.
Q
If
we
provided
a
browsing
section,
to
help
people
who
want
to
spruce
up
their
business
and
purchase
new
things,
do
you
think
that
would
be
useful?
:
“There’s
always
new
things
we
need.
A
lot
of
people
who
work
in
restaurants
live
and
breathe
their
business
so
they
are
constantly
looking
for
new
things
to
purchase.”
Next Steps & Additional Notes
-
• They purchase supplies from only a couple of vendors, all other purchases go through a store
• Really liked the idea regarding price comparisons. Constantly looking for cheaper deals so if they are able
to do that online it would be easier.
• The owner and Laura both do purchases
Primary Research Report Form
Interview Details
Student’s Name Ali Darzi Larijani Section 003
Expert’s Name: Racquel Luciano Date: 2 / 24 /13 Time: 3:00pm
Expert’s Title: Café Manager
Expert’s Employer Café Kubal Expert’s Phone Number: (315) 299-8300
Expert’s E-mail: racquel@kafekubal.com
Interview Questions
Question: How do you purchase your supplies for your business?